American household net worth reached a record in the third quarter, rising to nearly $170 trillion, according to the Federal Reserve on Thursday.
This data should alleviate concerns about rising household debt, particularly credit card debt.
The primary driver of this increase was rising equity prices, which added $2.8 trillion, marking the fourth consecutive quarter of significant growth.
More important, the recent surge in net worth indicates that asset growth has continued to outpace the rise in total debt.
This trend has brought the debt-to-asset ratio, a key metric for assessing household balance sheet health, down to a fresh 50-year low.
The household debt-to-asset ratio stood at 11% in the third quarter, compared to the previous low of 11.1% in the first quarter of 2022.
This data should alleviate concerns about rising household debt, particularly credit card debt, which has been a focal point for more pessimistic market observers skeptical of the economy’s recent strong performance.
Citing record-high debt without proper context—such as comparing it to total assets or income—can often be misleading. Debt alone does not provide a complete picture of balance sheet health, especially in an environment of high inflation.
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With equity markets reaching new highs in the fourth quarter following the election, we can expect the overall net worth of American households to increase further.
This is likely to be a key factor supporting continued strong spending and investment as the year concludes on a positive note.
